Sap SE - ADR

Q3 performance: very strong acceleration in cloud + AI-led demand - Total revenue: €10.3B, +12% YoY (non-IFRS, constant-currency growth rates). - Cloud revenue: ~€6.7B, +25% YoY (constant currencies). - Cloud ERP suite revenue: +28% YoY, now 89% of total cloud revenue. - Proven cloud backlog: €24.1B, +26% YoY (current cloud backlog growth remains the key leading indicator). - Profitability: Operating profit +18% to >€3B; operating profit growth aided by prior-year items (see next bullet). - Cloud growth driver: AI—9 out of 10 of the top 50 deals included AI and the Business Data Cloud.

Autonomous Enterprise / Joule momentum is translating into deals (opportunity) - Management emphasizes that customers are moving from “AI pilots” to deployment/usage, highlighted by Joule Work (natural language to execute tasks + “spaces” for live data views + “Joule Studio” for agent building). - Broader proof points: customers going live with RISE with SAP included large names across sectors (examples cited: Mondelez, Panasonic, Roche, etc.), plus many industry AI wins. - Business Data Cloud (BDC) positioning: customers increasingly see BDC as the data/process foundation required for enterprise AI; leadership claims BDC value is “spot on” and expands ontology/context beyond SAP data via Dremio/Reltio (and potentially further via workforce intelligence with WalkMe intent to acquire—mentioned as an example of ontology expansion).

Guidance/outlook: 2026 cloud+software guidance reaffirmed, but CCB is guided to the upper end; Q4 is the swing factor - For 2026 (current guidance): Management expects to trend toward the upper end of the previously guided Current Cloud Backlog (CCB) guidance range (cloud/software revenue, operating profit, and free cash flow guidance reaffirmed). - Why not more optimistic? (key challenge): Q4 is ~50% of annual bookings, so any macro/political uncertainty can hit bookings and therefore the trajectory into 2027. - CCB growth expected to decelerate in 2026 (as previously guided) due to: - macro/political uncertainty - a large base effect (absolute backlog growing every year) - Q3/Q4 comp dynamics and specific revenue recognition/catch-up effects.